Exhibit 10.1


 


PROMISSORY NOTE


(Variable Rate, Revolving
Loan)


(Renewal Note)


 


	
  Not to Exceed
  $9,000,000.00

  	
   

  	
  Sioux Falls, South Dakota

  
	
   

  	
   

  	
  July 30, 2008

  



 


FOR VALUE RECEIVED, NORTHERN LIGHTS
ETHANOL, LLC, a South Dakota
Limited Liability Company (“Borrower”), hereby promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION, a national banking association (“Lender”, which term shall include any
future holder hereof), at 141 N. Main Avenue, Sioux Falls, South Dakota, or at
such other place as Lender may from time-to-time designate in writing, in
lawful money of the United States of America, the principal sum of Nine Million &
00/100 Dollars ($9,000,000.00) or so much thereof as may be advanced hereunder.


 


LOAN RENEWAL. This
Promissory Note renews the loan evidenced in part by that Promissory Note dated
September 21, 2007, in the original principal amount not to exceed
$9,000,000.00 (the “Prior Note”). The terms of the Prior Note apply until July 30,
2008, the date this Renewal Note becomes effective.


 


CALCULATION OF INTEREST. Interest on each advance hereunder shall
accrue at an annual rate equal to 3.00% plus the one-month LIBOR rate quoted by
Lender (LIBOR + 3.00%), which shall be the one-month LIBOR
rate in effect two New York Banking Days prior to the stated monthly reprice
date, adjusted for any reserve requirement and any subsequent costs
arising from a change in government regulation, such rate to be reset monthly
on the last day of the month. The term “New York Banking Day” means any date
(other than a Saturday or Sunday) on which commercial banks are open for
business in New York, New York. Lender’s internal records of applicable
interest rates shall be determinative in the absence of manifest error. If the
initial advance under this Note occurs other than on the first day of the
month, the initial one-month LIBOR rate shall be that one-month LIBOR rate in
effect two New York Banking Days prior to the date of the initial advance,
which rate shall be in effect on the remaining days of the month of the initial
advance.


 


PAYMENT OF INTEREST. Payments of all interest accrued hereunder shall be made on the last
day of any month in which any amount is outstanding hereunder.


 


REVOLVING FEATURE. Borrower may from time to time prior to the
Maturity Date draw, on a revolving basis, the difference of the outstanding
principal amount hereunder and the lesser of (i) the Borrowing Base and (ii) Nine
Million Dollars ($9,000,000.00) (the greater of the two being the “Loan Maximum”).
Lender’s obligation to make any advance under this Promissory Note is
conditioned upon (i) all representations and warranties made by Borrower
in the Loan Agreement remaining true, accurate and complete, (ii) Borrower’s
continued compliance with all other terms and conditions of this Promissory
Note and the Loan Agreement including any preconditions to any advance
hereunder contained in the Loan Agreement, (iii) no Event of Default
having occurred under this Promissory Note, or any other Promissory Note
between the parties hereto, or under any other Loan Document, and (iv) Borrower
shall demonstrate to Lender’s satisfaction that the funds requested to be
advanced shall be used in the operation of Borrower’s ethanol production
facility. Subject to these conditions, Lender shall advance to Borrower
hereunder, such amounts as Borrower may from time-to-time request, not to
exceed the total principal amount at any one time outstanding hereunder of Nine
Million Dollars ($9,000,000.00). Such requests for advances hereunder shall be
funded the next Business Day if received by Lender not 


 

















 


later than 11:00 a.m.
of any Business Day, subject to Lender requiring additional time to confirm
Borrower has satisfied the conditions of this Note (including the Borrowing
Base requirements provided for below) at the time each such advance is
requested and made.


 


PAYMENT IN FULL AT MATURITY. The maturity date of this Note is July 28,
2009 (the “Maturity Date”). The total unpaid principal amount and all interest
thereon and any other amount due hereunder shall be payable on the Maturity
Date. THIS NOTE REQUIRES A BALLOON PAYMENT.


 


PAYMENT DUE ON NON-BUSINESS DAY. In the event any payment due under this Note
is due on a date other than a Business Day (as defined in the Loan Agreement),
such payment shall be due on the Business Day immediately following the day the
payment was otherwise due.


 


PREPAYMENTS. Borrower may prepay this Note in whole or in
part at any time, and if in part from time-to-time, during the entire term of
this Note, without penalty or premium. No prepayment shall reduce the amount of
any scheduled payment.


 


MANDATORY PAYMENTS PRI0R TO MATURITY. In the event the amount outstanding
hereunder at any time, including interest and any other amounts, exceeds the
amount which could be borrowed on such date according to the then applicable
Borrowing Base (the “Eligible Balance”), Borrower shall immediately pay to
Lender an amount not less than the difference between such balance and the
Eligible Balance.


 


BORROWING BASE. Definitions. As used in this Promissory Note: “Borrowing
Base” means, as of the day for which it is calculated, .75
(75%)  of the total of (i) the
fair market value of the outstanding Inventory, (ii) the Eligible Accounts
Receivable, and (iii) hedging accounts at fair market value; “Inventory”
means all Borrower’s corn, and ethanol, and DDGS Inventory, as determined to
Lender’s satisfaction; “Eligible Accounts Receivable” means Accounts (as
defined in the Uniform Commercial Code) owned by Borrower that were generated
by Borrower’s sale of Inventory, minus Ineligible Accounts; “Ineligible
Accounts” means Accounts which either have been outstanding more than 90 days,
or Accounts which otherwise would be Eligible Accounts Receivable that Lender
determines in its discretion should not so qualify. Eligible Accounts
Receivable shall exclude Borrower’s “contra” accounts and any other obligations
or offsets which any of Borrower’s account obligors may claim against Borrower.


 


Borrower Reports. Each
request for an advance hereunder shall be accompanied by Borrower’s report to
Lender evidencing the Borrowing Base as of the close of the previous Business Day, in a form and containing such
content as Lender shall from time-to-time specify to Borrower, including but
not limited to: reports of the Borrower’s Accounts itemized by age; reports of
the Inventory itemized by type, including its quantity, geographical location,
and information identifying any third party in possession or control thereof.
Borrower Report shall also report Eligible Accounts Receivable on a gross
basis, and be itemized as to all offsets that may be claimed by any account
obligor as further set forth in the definition of Eligible Accounts Receivable
above. If at the end of any calendar month any amount is outstanding hereunder,
not later than the 15th day of the following month, Borrower shall provide
Lender a report containing the above information as of the end of such prior
month. Borrower shall also provide Lender such reports at other times specified
by Lender. The request for advances shall be on the form attached hereto as Exhibit A,
unless Lender specifies otherwise.


 


Reasonable Processes and Controls.
Borrower shall
maintain reasonable processes and controls, provide accurate calculation of the
Borrowing Base and otherwise assure compliance with the Lender’s collateral
audit program, including instituting policies requiring its employee marketers
to 


 


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accurately enter each
contract for purchase or sale of Inventory (including other relevant
information as to the status of the contract, including any dispute by the
other party thereto) into Borrower’s accounting system immediately upon entry
into the contract. Among other information which shall be available to Lender
on a daily basis are the amount, identity, location, telephone number and other
relevant information concerning each account obligor, and the location and
quantity of all Inventory.


 


RENEWAL COMMITMENT FEE. In consideration of Lender’s agreement to
renew the loan evidenced by this Note, Borrower shall pay Lender not later than
the date of this Note first shown above a renewal commitment fee of Eighteen
Thousand Dollars ($18,000.00).


 


UNUSED COMMITMENT FEE. Borrower shall pay Lender quarterly, in arrears, an unused commitment fee.
The unused commitment fee shall be paid October 31, January 31, April 30,
and July 31. The unused commitment fee is equal to one-fourth percent (0.25%) per annum, multiplied by the
difference, if any, of the Loan Maximum minus the average daily outstanding
principal balance due hereunder for such prior quarter.


 


PAYMENTS. All payments under this Note shall be made in
immediately available funds. In the event there is no outstanding Event of
Default, all payments made hereunder shall be credited first to accrued
interest, next to unpaid principal, and next, in such order as Lender may
determined in its sole and absolute discretion, to other fees, charges, or
costs and expenses payable by Borrower under this Note or in connection with
any other Loan Document.


 


PREPAYMENTS. Borrower may prepay this Note in whole or in
part at any time, and if in part from time-to-time, during the entire term of
this Note, without penalty or premium. No prepayment shall reduce the amount of
any scheduled payment.


 


COLLATERAL;
COORDINATION WITH LOAN AGREEMENT. This Note is within
the definition of the “Note” in the Amended and Restated Loan Agreement dated
as of August 28, 2006, as amended by that Amendment to Amended and
Restated Loan Agreement effective September 21, 2007 (the “Loan Agreement”),
and is subject to the additional terms and conditions set forth in the Loan
Agreement and the Loan Documents referred to therein. This Note is secured in
part by (and is a Secured Obligation as defined in) a Security Agreement dated
as of August 28, 2006, and a Mortgage - Collateral Real Estate Mortgage;
Security Agreement, Fixture Filing and Assignment of Rents dated as of September 21,
2007, as well as other collateral described in the Loan Agreement and the other
Loan Documents. Capitalized terms not defined herein shall have the meaning
given such terms in the Loan Agreement.


 


LATE PAYMENT; GRACE PERIOD;
DEFAULT; CROSS-DEFAULT. If
a payment due hereunder is not made within ten (10) days after the date
when due, Borrower shall pay to Lender a late payment charge of Five Hundred
Dollars ($500.00) to compensate Lender for a portion of the cost related to
handling the overdue payment. Any default under this Promissory Note, the
Security Agreement dated August 28, 2006, or any Event of Default as
defined in the Loan Agreement, shall constitute an “Event of Default” for
purposes of this Note. After any Event of Default, the entire principal sum
evidenced by this Note, together with all accrued and unpaid interest, shall,
at the option of the holder hereof, bear interest at the rate per annum (the “Default
Rate”) equal to 3% in excess of the rate of interest per annum which would
otherwise be payable hereunder, and become immediately due and payable without
further notice (except as provided in the Loan Agreement), demand or
presentment for payment, and without any relief whatever from any valuation or
appraisement laws.


 


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PAYMENT OF OTHER TTEMS. If Borrower defaults under any of the terms
of this Note, Borrower shall pay all reasonable costs and expenses, including
without limitation attorneys’ fees (including any service tax thereon) and
costs, incurred by Lender in enforcing this Note immediately upon Lender’s
demand, whether or not any action or proceeding is commenced by Lender. Without
limiting the generality of the preceding sentence, such costs and expenses
shall include all attorneys’ fees and costs incurred by Lender in connection
with any federal or state bankruptcy, insolvency, reorganization, or other
similar proceeding by or against Borrower or any surety, guarantor or endorser
of this Note which in any way affects Lender’s exercise of its rights and
remedies under this Note or under the Loan Agreement or any other Loan
Document. Maker hereby stipulates that Lender is a “regulated lender” within
the meaning of SDCL 54-3-13 and other applicable South Dakota statutes.


 


NO OFFSET. No
indebtedness evidenced by this Note shall be offset by all or part of any
claim, cause of action, or cross-claim of any kind, whether liquidated or
unliquidated, which Borrower now has or may hereafter acquire or allege to have
acquired against Lender. To the fullest extent permitted by law, Borrower
waives the benefits of any applicable law, regulation, or procedure which
provides, in substance, that where cross demands for money exist between
parties at any point in time when neither demand is barred by the applicable
statute of limitations, and an action is thereafter commenced by one such
party, the other party may assert the defense of payment in that the two
demands are compensated so far as they equal each other, notwithstanding that
an independent action asserting the claim would at the time of filing the
response be barred by the applicable statute of limitations.


 


CERTAIN BORROWER WAIVERS. Borrower waives presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note
and any lack of diligence or delays in collection or enforcement of this Note.
Borrower agrees that this Note, or any payment hereunder, may be extended from
time-to-time, and Borrower consents to the release of any party liable for the
obligation evidenced by this Note, the release of any of the security for this
Note, the acceptance of any other security therefore, or any other indulgence
or forbearance whatsoever, all without notice to any party and without
affecting the liability of Borrower.


 


APPLICABLE LAW. This note shall be construed under and
governed by the laws of the State of South Dakota, without giving effect to
conflict of laws or principles thereof, but giving effect to federal laws of
the United States applicable to national banks. Whenever possible, each
provision of this note and any other statement, instrument or transaction
contemplated hereby or relating hereto, shall be interpreted in such manner as
to be effective and valid under such applicable law, but, if any provision of
this note or any other statement, instrument or transaction contemplated hereby
or relating hereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this note or any other statement, instrument or
transaction contemplated hereby or relating hereto.


 


NO WAIVER; CERTAIN MISCELLANEOUS PROVISIONS. Failure to exercise any option provided
herein shall not constitute a waiver of the right to exercise the same in the
event of any subsequent default. No modification or waiver by Lender of any of
the terms of this Note shall be valid or binding on Lender unless such
modification or waiver is in writing and signed by Lender. Without limiting the
generality of the preceding sentence, no delay, omission or forbearance by
Lender in exercising or enforcing any of its rights and remedies under this
Note shall constitute a waiver of such rights or remedies. Lender’s rights and
remedies under this Note are cumulative with and in addition to all other legal
and equitable rights and remedies Lender may have in connection with the Loan.
The headings of paragraphs of this Note are for convenience of the parties only
and shall not be used in interpreting this Note. If this Note is lost, stolen,
or destroyed, upon Borrower’s receipt of a reasonably satisfactory
indemnification agreement executed by Lender, or if this Note is mutilated,
upon Lender’s surrender of 


 


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the mutilated Note to
Borrower, Borrower shall execute and deliver to Lender a new promissory note
which is identical in form and content to this Note to replace the lost,
stolen, destroyed or mutilated Note, Time is of the essence in the performance
of each provision of this Note by Borrower. All exhibits hereto are
incorporated herein.


 


AT THE OPTION
OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH DAKOTA
STATE COURT SITTING IN SIOUX FALLS, SOUTH DAKOTA; AND BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSI-Ill’ CREATED BY THIS NOTE, LENDER AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED
WITHOUT PREJUDICE.


 


BORROWER AND
LENDER EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE LOAN DOCUMENTS
(AS DEFINED IN THE LOAN AGREEMENT) OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.


 


IN WITNESS WHEREOF, Borrower
has executed this Note as of the date first above written.


 


	
   

  	
  NORTHERN
  LIGHTS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Delton Strasser

  
	
   

  	
   

  	
    Delton
  Strasser

  
	
   

  	
     Its: President

  



 


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